Pay analysts, IRS reported in October that average settlements continued to stand at 3%; a figure that has remained unchanged for the last 18 months since April 2003.
In their annual survey launched today, IRS debate for how long settlements can stagnate at this figure.
According to the pay predictors four in ten employers believe that pay settlements will be worth 3% in the year ahead starting as of September 2004.
The manufacturing sector is less likely than the service sector to make higher pay awards in the next year. Six in 10 are tipped to be the same. Only a quarter are likely to receive a higher increase with 14.4% facing a lower settlement. The inability to raise the price of products and services is likely to put pressure on pay settlements for a third of manufacturers.
Prospects in the service sector look better with more than a third expecting to land higher awards with just over half (53.1%) forecasting settlements to be worth the same as the previous year with just one in ten admitting they might be looking at a lower award.
Company performance, the ability to pay, the rate of inflation and benchmark pay rates in like organisations are the main influencers on pay awards; according to IRS.
More than half of respondents (54%) expect company performance to place an upward pressure on pay settlements while 38.7% believe that the rate of inflation will do the same.
Merit pay systems topped the charts for the most popular type of reward strategy with almost seven in ten preferring this method. The cash bonus is the second most favoured reward tool, used by more than half (57.9%) of the survey’s respondents.
Skills-based pay continues to gain popularity. More than one-third of respondent organisations (35%) currently use skills-based pay as part of their reward strategy. This compares with 27.9% in 2003 and just 10.8% in 2002.
Nearly one-third of surveyed employers (31.6%) use employee share schemes. This compares to 21.1% in 2002.
Flexible benefits have also risen in popularity with 15.2% indicating plans to introduce this reward strategy within the next year.
IRS Employment Review pay and benefits editor Sheila Attwood said:
“The IRS headline measure of pay awards has remained remarkably stable over the past year at 3%. Although many employers are looking to replicate this over the coming year, there is a real possibility that pay rises will move above 3% in the early months of 2005, in response to higher inflation at the end of this year. But this is unlikely to be sustained beyond that time, and pay settlements will fall back to our 3% plateau.”
